Korean covered call ETFs posted positive returns in the one-month period ending July 8 despite a 10.69% KOSPI 200 index decline. TIGER 200 Covered Call ETF recorded a 15.88% return on a dividend reinvestment basis according to KOSCOM ETF Check, the highest among 21 domestic stock covered call ETFs. The positive performance stemmed from covered call ETFs' inherent strategy of selling call options on underlying assets and using the premiums as dividends, which partially cushions losses when underlying assets decline. Interest in covered call ETFs has increased as Korean stock markets experience sharp fluctuations, with asset management industry officials advising investors to examine underlying assets, call option strategies, and distribution rates before investing.
TIGER 200 Covered Call ETF Records 15.88% One-Month Return
TIGER 200 Covered Call ETF achieved a 15.88% one-month return as of July 8 on a dividend reinvestment basis, according to KOSCOM ETF Check. RISE 200 High Dividend Covered Call ATM and TIGER 200 Covered Call OTM followed with returns of 15.01% and 5.88% respectively. The KOSPI 200 index declined 10.69% over the same one-month period, while related covered call ETFs recorded positive returns.
Covered call ETFs generate returns by selling call options (the right to purchase underlying assets at a specific price) and using the premiums as dividends. This structure allows the ETFs to partially buffer losses when underlying assets decline.
High Dividend Covered Call ETFs Outperform Semiconductor Covered Call ETFs
Performance varied among covered call ETFs based on underlying assets during the one-month period. High dividend stock covered call ETFs recorded positive returns, with KODEX Financial High Dividend TOP10 Target Weekly Covered Call and ACE High Dividend Stock Plus Covered Call Active achieving returns of 4.8% and 2.96% respectively.
Semiconductor-focused covered call ETFs recorded negative returns during the same period. KODEX Semiconductor Target Weekly Covered Call posted a -4.3% return, TIGER Semiconductor TOP10 Covered Call Active recorded -3.69%, and FOCUS AI Semiconductor Weekly Fixed Covered Call returned 2.38%.
Target Weekly Covered Call ETFs Record Negative One-Month Returns
Call option strategies affected ETF returns during the period. KODEX 200 Target Weekly Covered Call, SOL 200 Target Weekly Covered Call, and TIGER 200 Target Weekly Covered Call recorded one-month returns in the -2% range.
Target weekly covered call ETFs differ from traditional covered call products by setting target distribution rates and flexibly adjusting call option selling ratios. These ETFs do not need to maintain 100% call option selling ratios, allowing them to capture more underlying asset appreciation. The recent market decline caused this characteristic to lower returns.
Year-to-date returns for target weekly covered call ETFs exceeded other covered call products. TIGER 200 Target Weekly Covered Call recorded a 90.23% year-to-date return, approximately three times higher than TIGER 200 Covered Call's 31.50% return over the same period.
An asset management industry official stated that target covered call ETFs showed lower returns during the recent decline due to higher market participation, but recorded high returns since the beginning of the year. The official advised investors to consider underlying assets, call option strategies, and distribution rates when investing in covered call ETFs.
PLUS High Dividend Stock Weekly Covered Call Leads Annual Distribution Rate at 25.17%
PLUS High Dividend Stock Weekly Covered Call recorded the highest annual distribution rate at 25.17%. TIGER Dividend Covered Call Active followed with an 18.02% annual distribution rate, while PLUS High Dividend Stock Weekly Fixed Covered Call and RISE 200 Weekly Covered Call recorded rates of 16.69% and 16.66% respectively.
KODEX 200 Target Weekly Covered Call held the largest net assets among covered call ETFs at 6.2382 trillion won as of July 7. TIGER Dividend Covered Call Active ranked second with net assets of 2.3103 trillion won.
FAQ
Why did Korean covered call ETFs record positive returns while the KOSPI 200 index declined during the one-month period ending July 8?
Covered call ETFs recorded positive returns because they sell call options on underlying assets and use the premiums as dividends, which partially cushions losses when underlying assets decline. TIGER 200 Covered Call ETF achieved a 15.88% return on a dividend reinvestment basis while the KOSPI 200 index declined 10.69% over the same one-month period according to KOSCOM ETF Check.
How did target weekly covered call ETFs perform compared to traditional covered call ETFs during the one-month period and year-to-date?
Target weekly covered call ETFs recorded one-month returns in the -2% range during the period ending July 8, underperforming traditional covered call products due to higher market participation during the market decline. However, year-to-date returns favored target weekly products, with TIGER 200 Target Weekly Covered Call recording a 90.23% return compared to TIGER 200 Covered Call's 31.50% return over the same period.
